Thinking about becoming a homeowner, but wondering where to start to make it happen? This five-minute read sums up the steps to take to achieve your goal.
By analyzing your financial situation, your financial institution can
help you calculate your borrowing capacity. You can also do this
yourself by using a calculation
Calculate the initial amount you’ll put down when the loan is granted.
The down payment reduces the loan amount and the
interest paid in your payments.
Before deciding on the down payment, you should assess your needs and budget.
Can you put down at least 20% of the purchase price? If your down payment amounts to 20% or more of the purchase price of your home, you may be eligible for a conventional loan and could save on mortgage insurance costs.
Is 20% of the purchase price beyond your budget? In cases where mortgage financing represents more than 80% of the value of the property, banks are required by law to obtain mortgage loan insurance coverage from the Canada Mortgage and Housing Corporation (CMHC) or SagenTM (formerly known as Genworth). In such cases, a mortgage loan insurance premium would be charged and could be added to the amount being financed1. The smaller the down payment, the higher the premium.
The down payment could come from your cash savings, investments, a gift, an inheritance or even your RRSP funds.
Have you thought about the Home Buyers’ Plan2 (HBP)? It’s a federal government program designed to make the purchase of a home more accessible to the average household. If you have registered investments (RRSP), you could take advantage of the Home Buyers’ Plan and withdraw up to $35,000 from your RRSP to use as a down payment.
Don’t have $35,000 in your RRSP but still want to take advantage of the Home Buyers’ Plan? An RRSP loan3 could help you—talk to your advisor about it.
You need to plan for certain additional expenses when buying a home. Here are a few to consider:
Mortgage transaction fees
In order to enhance your negotiating power and the credibility of your offer, before beginning your search, ask your advisor for a mortgage pre-approval. The mortgage pre-approval helps you establish your borrowing capacity, determine the mortgage amount for which you qualify, and guarantee an interest rate for 90 days. It can even give you a range of affordable home prices to make your house hunting easier.
You can now start looking. What kind of home do you want? Would you like to live in the city or the country? Do you want to buy a new construction or an existing home? These are some of the important questions you’ll have to answer.
You can do your own research or contact a real estate agent who can help you in your search for an existing home. If you’re looking to buy a new home, you’ll have to deal directly with the builder (or the builder’s sales staff).
The offer to purchase is the document containing
all the information necessary for closing the transaction.
Your real estate agent, notary* or lawyer will draw up this document, which includes the following information:
You can change your offer if the seller makes a counter-offer; that is, you can adjust your conditions to satisfy both parties.
The following are the main steps in applying for a mortgage. Your advisor will explain each one in detail at your first meeting and is there to support you throughout your home-buying experience.
Thanks to the National Bank Customized Mortgage Plan, at your first meeting with your advisor, you will assess your needs and determine the mortgage solution that best suits your budget, risk tolerance and financial commitments.
The Customized Mortgage Plan analyzes your mortgage financing needs and identifies the solution that’s right for you.
Your advisor assembles all the documents and information required for your application:
To confirm the market value of the home you’re interested in, your financial institution may ask to have the property appraised. The accredited appraiser is hired by the bank, and certain fees apply.
At this stage, if all the conditions required to secure your mortgage have been met, your loan will be approved and you’ll be about to become a home owner.
The seller is responsible for providing the following documents to the notary:*
You will meet with your notary* to sign the following official documents:
The bank issues payment of the loan to the notary,* who then pays the seller.
An advisor will provide you with ongoing support in order to meet your current and future needs, including:
1 The insurance premium can be added to your total mortgage loan.
File review fees and applicable taxes on the premium must be paid separately.
2 To be eligible for the Home Buyers’ Plan, the selected home must
be located in Canada, purchased or built before October 1 of the
calendar year following the RRSP withdrawal and serve as the buyer’s
principal residence within a year of being purchased or built. You
and your spouse can each withdraw up to $35,000 from your RRSP. You
have 15 years, as of the second calendar year after withdrawal, to
repay your RRSP. Your annual repayment must be equal to 1/15 of the
total amounts withdrawn.
* Quebec only
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